Fed, GDP & jobs—get ready for a busy week in the market

"Taper talk" should pick up again as the Federal Reserve gets set to meet Tuesday and Wednesday. While Fed officials are not expected to make any major changes in their statement or policy, traders will be watching for any subtle tweak that could indicate the Fed's views on tapering its $85 billion a month bond-buying program.

About a fifth of the S&P 500 companies report earnings in the coming week, and it's a first look at big oil, with BP, Exxon and Chevron all reporting. Then there are two major data releases — the Friday jobs report, always important, and second-quarter GDP on Wednesday.

Many economists expect second-quarter GDP to come in at less than 1 percent. But the big deal may be the government's special release of revisions going all the way back to 1929, which could make the economy look slightly better, at least on paper. The last time the government issued major revisions was 2009.

"Given there's no chance the Fed's going to do anything at all...I think you have to look at the GDP data and jobs data as more telling about the Fed than this [Federal Open Market Committee] meeting," said Ward McCarthy, chief financial economist at Jefferies. McCarthy said he expects more action at the September FOMC meeting.

Economists expect to see about 184,000 jobs were created in July , off slightly from 195,000 in June. The unemployment rate is expected to fall to 7.5 percent from 7.6 percent last month.

Since jobs are an important metric for the Fed, traders will be watching for any change of pace in hiring as a signal of whether the Fed would move sooner or later to lighten up on its quantitative easing, bond purchases. Fed Chairman Ben Bernanke has said the Fed could start to taper before year end, depending on the data. Many Fed watchers expect the Fed to start reducing its purchases in September, if the jobs numbers remain at current levels or better.

"If we do something like 250,000 jobs, you know what's going to happen, but if we do something like, 100,000, you also know what's going to happen," said Jim Paulsen, chief investment strategist at Wells Capital Management. While Fed tapering has been a catalyst in moving rates higher, interest rates have also moved up on the last couple of positive employment reports.

Paulsen said the GDP changes could also be important to the Fed, since job growth has outpaced the slow crawl of GDP growth this year. "Near term, the data does not add up. GDP growing at 1 percent is not what's going on Main street," he said. "GDP revisions could be big. They could be a yawn but they could also be big … If it goes up a lot, I think it will affect the Fed's tapering decision."

J.P. Morgan economists predict the revisions should actually boost the level of GDP by about 3 percent but not necessarily change the growth rate of GDP in recent years.

One change is that research and development spending will be counted as a form of investment spending, and spending by entertainment and media companies on movies and other entertainment will be considered investing in intellectual property.

"The recession will probably end up being worse and the recovery will probably end up being better," said McCarthy. "I'm betting that it also helps Q2 … If it were not for this new way of calculating GDP, I would be below 1 percent." McCarthy's forecast is for 1 percent second-quarter GDP growth.

Pisani: A pause in stocks this week

CNBC's Bob Pisani looks at earnings season and the companies slated to report next week. He also believes this Fed meeting will be far less likely to include a policy change because there's no press conference.

There is another major event for the Treasury market next week. On Monday at 3 p.m., the government releases its borrowing projections for the rest of the year. McCarthy expects the government to require less funding because of the narrower deficit, and that would result in an announcement of smaller auctions when the Treasury releases that information Wednesday.

The Treasury market would therefore see less issuance, around the same time the Fed may start cutting back on its purchases of Treasury and mortgage securities.

Whither Markets

Despite gyrations, stocks finished the past week flat; the Dow and S&P 500 both changed less than 0.1 percent. The Dow finished Friday at 15,558, and the S&P 500 was at 1691.The Nasdaq was the exception, gaining 0.7 percent to 3613. The 10-year note, which had spooked stocks earlier in the week when it crossed above 2.6 percent, was at 2.57 percent Friday.

While the major stock indices ended flat, some individual stocks had big moves on earnings news this past week. Perhaps the most high-profile mover was Facebook, up 30 percent on a positive earnings surprise.

About half of the S&P 500 has reported earnings so far, and 68 percent have beaten earnings estimates, while 56 percent have beaten revenue forecasts, according to Thomson Reuters. The growth rate for second-quarter earnings, including forecasts for those that have not yet reported, is 4.1 percent, compared to 2.9 percent back on July 1.

As stocks have soared to new highs, some analysts have expressed doubts about earnings growth, and worries that rising interest rates will derail the rally. But others, like Thomas Lee of J.P. Morgan and Savita Subramanian of Bank of America Merrill Lynch have raised their year-end targets. Lee raised his target to 1775 Friday, and Subramanian raised hers to 1750 earlier in the month.

Lee said he raised his target from 1715 because of better euro zone data and continued momentum in U.S. housing and autos. Subramanian expects earnings growth and an improving economy to help drive the market, and she sees the S&P up 10 percent in the next year.

Paulsen's target for the S&P at year end is 1700, and he has no plans to change the target. "I think we're going to range trade the rest of the year," he said, adding the S&P could cross above 1700 but also break below 1600 again.

He said the market is moving higher on confidence, rather than on earnings. But his big concern is emerging-markets growth. "It's emerging-world growth. I think that's the biggest short-term risk. It's not just China. Emerging-world growth year-on-year has gone from 8 percent to four percent. It's got to stop getting worse," he said.

Traders will be paying close attention to China manufacturing data — the China official PMI and HSBC final PMI — when they are released Thursday.